NAMA is providing staple finance to purchasers of its loans

Potential purchasers of the two NAMA loan portfolios currently on the market – the €810m Project Aspen loans of David Courtney and the €230-330m of Project Club loans of Eamon Duignan – may be interested to know that NAMA may provide finance to prospective purchasers.

It was confirmed in the Dail yesterday that NAMA is now offering staple finance – or “vendor finance” – to purchasers of its loans. Up to now, it was believed that NAMA was restricting the offer of such finance to its buildings, but this revelation means buyers can get access to cheap finance – estimated to be priced at 3-4% – to cushion the upfront cash requirements.

NAMA published a guide to its vendor finance at the start of January 2013 – available here and mostly reproduced below (click to ENLARGE). It doesn’t mention loan sales.

So, we now have a situation where NAMA might have acquired €810m of loans from the banks for €250m and is total selling the loans to a buyer who might pay €90m up front, and will pay NAMA 3-4% per annum on the balance of the purchase price and will pursue the borrowers. The purchase might also conceivably circumvent NAMA’s “no sale to debtors” rule, but in any event will manage the loans in much the same way as we expected NAMA to manage such loans. Why did we have to create an expensive dog like NAMA, only to have to bark ourselves?

There is a burgeoning loan business in Ireland at present, and below is a selection of recent transactions.

The Sinn Fein finance spokesperson Pearse Doherty was questioning the Minister for Finance Michael Noonan on the matter. The full parliamentary question and response are here.

Deputy Pearse Doherty: if he will confirm if the National Asset Management Agency provides so-called staple finance or vendor finance to purchasers of its loans, as opposed to purchasers of its real estate property.

Minister for Finance, Michael Noonan: NAMA advises that vendor finance may, on a case by case basis, be made available as part of the sales process relating to both qualifying assets and loans. NAMA advises that it has published an information guide on vendor finance, which is available on the NAMA website, http://www.nama.ie, to which the Deputy may wish to refer for further information.